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Business Monitor International report reaffirms government forecast for 2007

Report: low potential for political reform positive sign for economy CAIRO: A Business Monitor International (BMI) report released Thursday ranked the Egyptian economy first in the Middle East region on growth potential in 2007. The report confirmed the forecast of Minister of Investment Mahmoud Moheiddin for $7.5 billion to $8 billion in foreign direct investment …

CAIRO: A Business Monitor International (BMI) report released Thursday ranked the Egyptian economy first in the Middle East region on growth potential in 2007.

The report confirmed the forecast of Minister of Investment Mahmoud Moheiddin for $7.5 billion to $8 billion in foreign direct investment (FDI) this year.

The report came just days after Minister of Economic Development Othman Mohamed Othman asked the public at a National Planning Institute seminar to trust government figures and forecasts based on reforms implemented since 2004.

Since the release of 2006 numbers showing 6.9 percent GDP growth, some economists have doubted the potential of further growth to 7.2 percent this year, as forecasted by the government, because of the lack of political reform.

But the BMI report actually sites the low potential of political reform as a result of the National Democratic Party-introduced constitutional reforms as the main reason behind the organization’s outlook for political stability and, therefore, economic growth.

BMI is a London-based emerging markets news organization, regularly cited by economists and regarded by investors as a credible source of information. HC Brokerage Economist Reem Mansour said she agrees with the report.

“Of course [political and economic reform] are very much correlated, but at the end of the day I do not think democracy will serve the economic picture at this point, Mansour told The Daily Star Egypt.

She cited autocratic regimes in East Asia as examples of systems that have been able to inspire sustainable economic growth.

“What we need, whether [the political system] is democratic or autocratic, is to fight corruption, Mansour added. “The government will always highlight the positive picture.

Othman, former head of the nixed-Ministry of Planning before the August 2006 Cabinet shake-up, said his initial forecasts pre-2004 were negative based on a struggling economy at the time. The numbers have since changed not based on a government-directed campaign, but on growth inspired by new economic policies, he added.

Samir Radwan, former managing director of the Economic Research Forum, said the 2007 figures are positive but must be coupled with political reform in order to be maintained.

“Stability is the key, but it does not mean stifling. The government must continue to reform the political system and I think the recently-introduced amendments have a chance to do that, Radwan said.

“Seven percent growth in one year is not the trick; the trick is this has to continue for 10-20 years. We have to continue our economic growth and draw foreign investment so we can see real change.